Inter RAO Plans Sale of State-Owned Shares in London Next Year

Nov. 22 (Bloomberg) -- OAO Inter RAO UES, Russia’s third-largest power producer, plans a public offering of state-owned
shares on the London Stock Exchange next year.

“We are preparing it for next April, but there is no set
date,” Ilnar Mirsiyapov, Inter Rao’s head of strategy and
investment, said in an interview. “It depends on when exactly
the government will decide to sell.”

The Russian government has a direct stake of 13.8 percent
in Inter RAO, whose shares are currently traded in Moscow. The
proposed sale follows an agreement Moscow-based Inter RAO signed
with the European Bank of Reconstruction and Development in July
this year for a five-year convertible loan of 9.6 billion rubles
($307 million) to prepare the company for a potential
international public offering.

Prime Minister Dmitry Medvedev’s government is seeking to
boost budget revenues by selling state assets, including shares
in Inter RAO and OAO Rosneft, the country’s biggest oil
producer. The government raised 159.3 billion rubles selling
shares in lender OAO Sberbank this year and plans to dispose of
stakes in tanker operator OAO Sovcomflot and diamond monopoly
OAO Alrosa next year.

Other Russian companies that have sought London to list
their shares include OAO MegaFon, Russia’s second-largest
mobile-phone operator, which plans to raise as much as $2.1
billion in the biggest initial public offering by a company from
the country since aluminum maker United Co. Rusal’s sale almost
three years ago. MegaFon’s shares will start trading Nov. 28 in
London and Moscow.

Pay Debt

Inter RAO won’t sell any of the shares it keeps in
treasury. The company plans to use a third of the shares it owns
to pay back in 2014 a debt the company has to Russia’s state-run
gas exporter OAO Gazprom.

“We are keeping 2 percent for EBRD and the rest will
probably be used for mergers and acquisitions,” Mirsiyapov
said.“We are cautious though and we want to be very
selective.”

The Russian state nuclear company Rosatom owns 12.5 percent
of the company’s shares, while OAO GMK Norilsk Nickel, the
world’s largest producer of the metal, has a 13 percent
ownership.

The company aims to pay shareholders 25 percent of its net
income from 2014, a level for state-controlled companies set by
new Russian government regulations approved earlier this week.

“The new rules state that companies can increase dividends
to 25 percent gradually,” Mirsiyapov said.

Rosneft Contract

Rosneft, which owns almost 1 percent of the company, will
supply 99 percent of the natural gas for Inter RAO’s plants from
2016 after Russia’s biggest oil producer won a 25-year contract
from OAO Novatek. Novatek is currently providing almost 55
percent of Inter RAO’s gas needs, with the rest being supplied
by OAO Gazprom and TNK-BP.

“Rosneft will be our main partner in any plant we would
build from now on,” Mirsiyapov said. Rosneft, whose CEO Igor
Sechin was formerly chairman of Inter RAO’s board, will deliver
as much as 35 billion cubic meters a year to Inter RAO starting
from 2016.

Inter RAO, which posted net losses of 10.7 billion rubles
for the first half of this year, put its overseas expansion
plans on hold this summer as utilities’ market values declined.
For the first six months of 2011, Inter RAO announced net income
of 46.7 billion rubles.

The company was looking to expand aggressively in Europe,
Latin America and Southeast Asia in partnership with Gazprom, as
it sought to rank among the world’s ten biggest utilities by
capacity by 2020. Inter RAO said in February it wanted to buy
assets from RWE AG.